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When Paul Hletko's grandfather died in 2008, the Evanston, Ill.,
patent attorney wanted to do something to honor his legacy.

His grandfather, a Jew from Czechoslovakia, had operated a
brewery there until it was taken away during World War II;
Hletko, who had been a home brewer for two decades, decided to
open a craft distillery in his memory.

"After doing a lot of research, I decided that the right place to
do it was right where I live," he says. The problem was, Evanston
was a notoriously dry town. In the late 1800s, the Chicago suburb
was the home of Frances Elizabeth Willard, head of the Woman's
Christian Temperance Union. Alcohol wasn't served in the town's
restaurants until the 1970s, and the first liquor store didn't
appear until the 1980s. But Hletko wanted to be close enough to
home to walk his three kids to school, so he wasn't going to let
a little thing like a century-long bias against alcohol get in
the way of launching FEW Spirits (named for Willard).

Legal obstacles can be as frightening to lawyers as they are to
would-be business owners, says Jonathan Askin, a Brooklyn Law
School professor and founder of the Brooklyn Law Incubator and
Policy Clinic (BLIP), which offers pro bono services to help
startups navigate legislative, regulatory and judicial obstacles.
"Too many lawyers stop wonderful ideas dead in their tracks
because they're worried about dotting every i and crossing every
t," he says. "If a law doesn't enable innovation, lawyers should
work to reform the law."

That's exactly what Hletko set out to do, using his own training
as an attorney to his advantage--despite knowing he'd be fighting
an uphill battle. "The legal landscape was difficult," he
acknowledges. "I not only had to get the liquor laws changed, I
also had to get zoning laws changed. That impacted the health
department, and then everyone got involved."

He started with the liquor laws, getting Evanston to put a new
class of license for microdistillers on the books. Next came
hearings in front of the zoning board to get a generic "special
use" provision to allow a craft distillery to operate by special
permission in specified zoning classes. Then he had to secure
that zoning class for his planned location. Finally, he got the
health department to establish a law permitting distillation as
well as food (in the case of FEW Spirits, pretzels) without a
commercial kitchen--something previously required of any Evanston
establishment serving alcohol. The whole process took about a
year.

FEW Spirits started production in June 2011, and business took
off quickly. FEW's gin, rye and whiskey are sold in trendy bars
and restaurants in Chicago, Seattle and Vancouver, British
Columbia. Last year the company's white whiskey won a Double Gold
medal (the highest award) at the New York World Wine and Spirits
Competition and a gold award from the Beverage Tasting Institute.

"I lost track of my city hearings after 15 of them, but despite
the volume I never once took a ‘no' vote, and all of the law
changes I sought were unanimously approved," Hletko says, noting
that the backing of Evanston's economic development office was a
huge help. "My network played a big role, too. I'm the vice
president of the PTA at my kids' school. I coach soccer and
T-ball. I'm on the board of directors for the chamber of
commerce. People around town know me and what I'm about, which is
handy when looking at a business like mine."

It helped, too, that as an attorney, Hletko didn't have to worry
about racking up legal fees. "All of that would have easily added
up to 80 to 100 billable hours," he says, estimating the
equivalent cost at more than $20,000.

Moving Forward
Often the law can't keep up with rapid innovation. "No templates
exist to help navigate the confused business, legal and
regulatory quagmire confronting would-be innovators and emerging
firms whose business models were never contemplated by existing
laws and regulations," BLIP's Askin notes.

He speaks from experience. In 2003, while working on Free World
Dialup, an internet-based voice communications service, his
company filed a petition with the FCC asking that the product not
be regulated as a telecom. When the FCC released its order, it
paved the way for a competitor, Skype, to launch an unregulated
service, stealing Free World Dialup's thunder and business. "What
I took away from that was that sometimes you need to let the law
catch up with you," Askin says.

This is particularly true when it comes to digital businesses,
which often have to deal with laws written for an analog,
pre-internet world. One client BLIP helped in this arena was
StationStops, a scheduling app created in 2008 for Metro-North
trains that run in and out of New York's Grand Central Terminal.
The issue boiled down to whether the Metropolitan Transportation
Authority (MTA) owned its scheduling information as copyrighted
intellectual property, and whether an app developer could format
and sell this information to make a profit.

"Just a few years ago, this was an IP battle to get access to the
MTA info," Askin says. "Now it's routine to get online datasets,
but this was all new then."

Chris Schoenfeld, the software developer who created
StationStops, was encouraged by other developers' IP battles.
"Goliaths have plenty of legal resources to measure their risk
for them. Davids don't, and the more anecdotes future
entrepreneurs have to discover and draw on, the greater the
likelihood more will be willing to aggressively measure and
manage their risk, rather than simply avoiding it out of fear,"
he says.

Push Back
Fear didn't stop Reema Khan or Curprice Luckert, two
beauty-industry entrepreneurs who faced problems when they tried
to expand into new states.

Khan is the founder of s.h.a.p.e.s. Brow Bar, a Cerritos,
Calif.-based chain of 60 salons and kiosks that specialize in a
hair removal process known as threading. When she sought in 2007
to add locations in Texas, the state's health department
threatened to shut s.h.a.p.e.s. down because employees were not
licensed cosmetologists. This had not been a problem in Illinois,
where she started her business and where threading is exempt from
laws that apply to traditional salon services.

"The problem was that cosmetology schools don't teach threading,"
she says. "It doesn't fall under traditional cosmetology
guidelines; it's an ancient practice. As long as it's done in a
sanitary environment, there's no need for a license."

In 2010, with the help of the Texas branch of the Institute for
Justice libertarian law firm, Khan was able to get an injunction
against the health department and its inspectors that prevents
them from contacting the brow bars until the case is resolved.
It's still in the courts, but Khan is optimistic about the
outcome.

Luckert faced a similar issue last year when she sought to expand
her Beverly Hills, Calif., salon, Angel Hair Braids, to Las
Vegas. "The licensing requirements for braiders were much
different in Nevada. [There], braiders were required to attend
cosmetology school for 1,200 hours, whereas in California,
braiders had become exempt from these laws years ago," Luckert
says. "I called multiple cosmetology schools in Nevada. Nearly
all of them said that they didn't teach braiding."

Persistent research paid off with a meeting with Nevada's
director of cosmetology and a lobbyist who worked with Luckert to
get the law changed. "There were many hearings, lots of traveling
and, more than anything, tons of stress accompanied with these
efforts," Luckert says. In June 2011, the law passed allowing
braiders to attend 250 hours of schooling, with a focus on
infection control. Because she received pro bono help and did a
great deal of research herself, Luckert's expenses of about
$2,600 were related mostly to travel and fees.

"More than anything, it was the time and stress ... that really
proved to be the most challenging," she says. "There was so much
opposition from folks and organizations that I never thought
would be opponents of any sort. It was a very upsetting process
at times, but ultimately extremely rewarding."

Khan's experience has taken a huge financial and emotional toll;
she estimates she has spent $100,000 so far trying to get the law
regarding threading changed. "All of my profits [for one year]
went to legal fees, flying in and out of Texas and costs related
to this case. Scared employees were calling me to quit in the
middle of the night, and I was wrapped into long-term leases at
shopping malls that I couldn't get out of," she says. "It felt
like I was living a nightmare."

While an element of panic is the price of running a startup, some
anxiety can be avoided by talking to a legal expert before you
get too far into the process, says Jennifer Berrent, a partner at
the New York office of WilmerHale, a law firm with litigation,
regulation, intellectual property and other practices.

"Even if laws are antiquated, there's someone who has seen it,
and if you can find the right kind of experts, they can demystify
it," Berrent says. "A lot of people starting businesses don't
like to think about legal issues, but seeking out an additional
level of expertise early in the process can help you adjust your
business model or help you see a different way to approach what
you're up against.

"Every day I see something new in the context of what I already
know. Your company is your baby; you want to get legal advice
from someone who understands the laws related to it."